Market Outlook as at June 29, 2020

Last week, FBMKLCI closed just a tad below its uptrend line. This - together with the a convincing breakdown of the uptrend line for FBM70 - will likely point to further weakness ahead for our market for this week.

Chart 1: FBMKLCI's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

Chart 2: FBM70's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

2nd & 3rd liner stocks are likely to have drop only slightly, as shown by the sideways movement of FBMSCAP. Then again, these stocks did not raise sharply, except for a selective few and the chart is showing a pattern that looks like a rounding top. If this index were to break down below 11500, the decline will likely be more broad based. 

Chart 3: FBMSCAP's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

If you looked through all the indices of the various sectors on Bursa Malaysia, the ones that stood out are the health and technology sectors. The health sector has benefited from the huge rally for glove stocks and "pandemic" stocks while technology stocks have rallied due to the rally for e-commerce and related stocks. One surprising sector that has managed to keep its uptrend line in tact is plantation sector. See the charts below.

Chart 4: BM Health's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

Chart 5: BM Technology's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

Chart 6: BM Plantation's daily chart as at June 26, 2020 (Source: Malaysiastock.biz)

For the next few days, you can expect the broad market to be weak and trading to be choppy. 

YeeLee: De-listing from 1 July 2020

YeeLee will cease trading on 1 July 2020 as the stock will be de-listed from the exchange after the major shareholder(s) have successfully acquired more than 90% of its issued shares. For more, go here.

In May, the major shareholder(s) extended its offer to buy out minority shareholders from 12 May 2020 to 23 June 2020 at a price of RM2.06 per share, which is lower than the earlier offer price of RM2.33 per share in the unsuccessful take-over offer in April 2019.

Yesterday, the major shareholder(s) have offered to buy out any remaining minority shareholders' shares even after the de-listing of the stock at the same price of RM2.06 per share, up to 24 September 2020. For more details & "Acceptance Form", go here.

Chart: YeeLee's daily chart as at 26 Jun 2020 (Source: Malaysiastock.biz)

If you are a minority shareholder of YeeLee, you have a choice of (1) holding onto the shares of a private company or (2) selling off the shares in open market (before 1 July 2020) or by accepting the offer by the major shareholder(s) before 24 September 2020. 

My recommendation is to selling off YeeLee shares whichever way is to your convenience. If you still like to be invested in a stock with YeeLee DNA, you can consider Spritzr, a natural mineral water company that's currently part of the YeeLee group. 

PERMAJU: A Warning!

The euphoric rally among 3rd liner stocks experienced in the past 1-2 months has generated much excitement in the market. Some of these stocks have doubled up in a matter of days, with no regards to fundamental. This may come to an end soon.

As the harsh economic reality starts to bite, weaker companies would have to raise funds to tie over the dry months and years ahead. An example is PERMAJU which is now implementing a Rights issue of Irredeemable  Convertible Preference Shares (RCPS) at an issue price of RM0.05 each (which comes with free warrant) on the basis of 10 RCPS together with 1 free warrant for every 2 shares owned. The ex-date for this Rights issue is on July 13. You can see the announcement of the ex-date on Bursa Malaysia on June 19 (here) triggered the sell-down of the stock.

Chart: PERMAJU's daily chart as at June 24, 2020 (Source: Malaysiastock.biz)

On the other hand, there are a few stocks that tried to avoid calling for Rights issues. Instead they chose to raise fund by way of private placement. Their share prices rallied in the past few days. Examples are CNASIA and IRIS. The logic, if you accept it as logical, is that the major shareholders have to push up the share price in order to induce investors to buy into the private placement. Sometimes this effort of logic works. Oftentimes, it doesn't. As Abraham Lincoln once said; “You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.”  

Be careful out there.

Spritzr: Earnings Poised to Rise

Result Update

For QE31/3/2020, Spritzer's net profit rose 35% q-o-q or 14% y-o-y to RM8.8 million while revenue rose 6% q-o-q but dropped by 2% y-o-y to RM93 million. The Group revenue rose q-o-q due to  increase sales volume. The Group recorded a profit before tax of RM13.2 million during the current quarter ended 31 March 2020, representing a 61% increase from the RM8.2 million recorded in the immediate preceding quarter ended 31 December 2019 mainly due to increase in sales revenue and decrease in cost of raw materials.


Table: Spritzer's last 8 quarterly results

Spritzr' top-line has been rising steadily for the past 14 years and its bottom-line looks poised to break into new high!


Graph: Spritzer's last 56 quarterly results

Financial Position

As at 31/3/2020, Spritzr's financial position is deemed very healthy with current ratio at 3.3 times and total liabilities to total equity at 0.2 time only.

Valuation

Spritzer (closed at RM2.00 yesterday) is now trading at a PE of 13.0 times (based on last 4 quarters' EPS of 15.39 sen). At this PER, Spritzer is still deemed fairly attractive for a consumer stock. Its dividend yield is on the low side at 2.25%.

Technical Outlook

Spritzr has been moving sideways for the past 4 years, between RM2.00 and RM2.50. In March, Spritzr broke below the RM2.00 support and went as low as RM1.70. It has since recovered back above the RM2.00 mark.


Chart : Spritzer's monthly chart as at Jun 24, 2020  (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance, healthy financial position and attractive valuation, Spritzer is a good stock to consider for long-term investment.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Market Outlook as at June 19, 2020

Last week's correction has brought the FBMKLCI to the medium-term uptrend line, SS at 1500. The index is now hovering just below the long-term downtrend line, RR which stretches back to April 2018. With MACD hooked down and Stochastic RSI in the oversold territory, the index may continue to consolidate for a while. A break below the 1500 level could send the index to the 1450 level, which is the line connecting the recent lows after the rally began in March.

Chart 1: FBMKLCI's daily chart as at June 19, 2020 (Source: Malaysiastock.biz)

The weakness among the blue chip stocks - especially among the glove stocks - have not stopped the play among the 2nd and 3rd liner stocks. In fact, small-cap stocks and tech stocks have been charging higher, which reflects a similar trend in Nasdaq. See the charts for Dow and Nasdaq below.

Chart 2: FBMACE's daily chart as at June 19, 2020 (Source: Malaysiastock.biz)

Chart 3: DJIA's daily chart as at June 19, 2020 (Source: Stockcharts.com)

Chart 4: Nasdaq's daily chart as at June 19, 2020 (Source: Stockcharts.com)

Based on the above, I believe the broad market may hold steady for this week. Trading will continue to be choppy, and it will favor those who are nimble and ruthless. Good luck!!

MYEG: Poised for Breakout?

In the current unstable environment, there are a few stocks that are still sticking to their resistance levels. The question to ask is why? Why are they dropping back? One of such stocks is MYEG which is still pushing again the upper line of its trading range at RM1.50-1.52..  

Chart: MYEG's daily chart as at Jun 17, 2020_4.00pm (Source: Malaysiastock.biz)

Its CWs are also trading at fairly high premium.


Table: MYEG's CWs with minimum tenor of 90 days

Something is cooking here. Watch out!!

GPacket: No Hurry to Sell

After 3 weeks of painful profit-taking, GPacket and GPacket-WB have dropped back to their respective tentative uptrend lines. If they do not break below the uptrend lines, they may find their support here and slowly begin their recovery. Both securities may be at a good level for slow accumulation. 

Chart 1: GPacket's daily chart as at Jun 17, 2020_4.00pm (Source: Malaysiastock.biz)

Chart 2: GPacket-WBs daily chart as at Jun 17, 2020_4.00pm (Source: Malaysiastock.biz)

Market Outlook as at June 16, 2020

Our market took a severe blow yesterday. The FBMKLCI has dropped back below the 200-day SMA line as well as the downtrend line, SS which stretches back to April 2018. The indicators have turned bearish with MACD hooked down and Stochastic RSI below 50. 

Chart 1: FBMKLCI's daily chart as at Jun 15, 2020 (Source: Malaysiastoc.biz)

The question that arose is whether the all green light which I pointed out earlier (here) is now negated. The conditions that must be satisfied on the weekly basis are:

1. Index rose above both 10 & 20-week SMA lines
2. MACD crossed above the MACD signal line
3. Stochastic RSI was above 80 (or, in oversold territory)
4. +DMI crossed above -DMI and continued to diverge

Chart 2: FBMKLCI's weekly chart for 1997-1999, 2007-2009 and 2018-2020 (Jun 15) (Source: Malaysiastoc.biz)

Looking at the weekly chart above, the index is still meeting the above conditions. However, we cannot ignore the warning sign of the failed breakout above the downtrend line, RR. Together with the failure to stay above the 200-day SMA line (as highlighted in Chart 1 and Chart 3), we have to be careful that the market uptrend may fail to take off & reverse. 

Chart 3: FBMKLCI's daily chart for 1997-1999, 2007-2009 and 2018-2020 (Jun 15) (Source: Malaysiastoc.biz)

We will watch the market for the next few days to assess whether the current severe correction will change the trajectory of the market, resulting in more consolidation.

Topglov: Earnings Soared 366% y-o-y

Results Update

For QE31/5/2020, Topglov's net profit soared 201% q-o-q or 366% y-o-y to RM348 million while revenue rose 37% q-o-q or 42% y-o-y to RM1.688 billion. Revenue increased q-o-q due to growth in Sales Volume (Quantity Sold) of 25%  and average selling prices (ASP) of 14%. The company expects the further increase in profits in the next few quarters due to soaring demand and higher ASP.

 
Table: Topglov's last 8 quarterly results


Graph: Topglov's last 71 quarterly results

Valuation

Topglov (closed at RM16.70 yesterday) is now trading at a trailing PE of 65 times (based on last 4 quarters' EPS of 25.6 sen). However, if you forecast Topglov's forward earnings based on its EPS for QE31/5/2020 number, its EPS for next year would be at least 54 sen (assuming no further increase in earnings). Thus its forward PE would be only 31 times. At the forward PE of 31 times, Topglov is deemed fairly attractive

Technical Outlook

Topglov broke above the horizontal line of RM6.30-6.50 in mid-March. Thereafter, the share price went into an exponential rise which added RM10.00 to above RM16.00 now.


Chart 1: Topglov's weekly chart as at June 11, 2020 (Source: Malaysiastock.biz)


Chart 2: Topglov's semi-log monthly chart as at June 11, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance and attractive valuation, Topglov is a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Market Outlook as at June 4, 2020

Yesterday our FBMKLCI rose 30.84 points to 1538.53. It broke above the 200-day Simple Moving Average ("SMA") line at 1520. It may soon test the intermediate downtrend line (in red) at 1550 soon. The same pattern can be seen in FBMEMAS chart. Look at the FBMKLCI and FBMEMAS below.

Chart 1: FBMKLCI daily chart as at Jun 3, 2020 (Source: Malaysiastock.biz)

Chart 2: FBMEMAS daily chart as at Jun 3, 2020 (Source: Malaysiastock.biz)

The question of whether the market has now satisfied the conditions laid down in my earlier post (here) to call the beginning of a market's next upleg must be examined again. To wit:

The set-up for both market uptrends in November 1998 (the numbers are in blue) and March 2009 (see the numbers in green) are:

1. Index rose above both 10 & 20-week SMA lines
2. MACD crossed above the MACD signal line
3. Stochastic RSI was above 80 (or, in oversold territory)
4. +DMI crossed above -DMI and continued to diverge

The failed market uptrend in June 1998 fell short in one area, namely after +DMI had crossed above -DMI, they did not diverge but instead became entangled and eventually reversed. This could be due to the failure of the index to go above the 40-week SMA line, which eventually reversed downward.

As at yesterday, we can see that all the above 4 conditions have been satisfactory.

Chart 3: FBMKLCI's weekly chart for 1997-1999, 2007-2009 and 2018-2020 (Jun 3)

Like in the past 2 earlier crisis periods, we are now above the 200-day SMA line, which signals the entry into the bullish phrase in the market.

Chart 4: FBMKLCI's daily chart for 1997-1999, 2007-2009 and 2018-2020 (Jun 3)

Based on the above, I believe the next upleg in the market has begun. Some may still want the main indices (FBMKLCI and FBMEMAS) to break above their respective immediate downtrend lines before pulling the trigger. It is still good to play it safe and by buying into the laggards (say, Maybank over PBBank) and doing so progressively. Good luck.